COMPLETE TURNAROUND: Chief Financial Officer (CFO) Glen French joined Trover Solutions in 2009 to become chairman of its investment committee. Retirement plan participation rates were 77% then, and participants were deferring just 1% to 2%, even with Trover’s dollar-for-dollar 6% match, he says.
Additionally, participants were not selecting the appropriate target-date funds (TDFs). “We had 25-year-olds investing in 2020 TDFs. Discrimination testing had failed for 10 years, so the executives were lackluster about the plan,” French says.
French believed the Louisville, Kentucky, company, which is in the niche business of insurance subrogation, should offer benefits to help employees become retirement ready—with keeping attrition down as an added bonus.
French consulted with financial consultant firm Hilliard Lyons, which suggested that he read “Save More Tomorrow,” the book about progressive plan design by UCLA economist Shlomo Benartzi. French proceeded to lead the committee toward plan participation and savings goals of what author Benartzi calls the “90–10–90 Rule”: at least 90% of participants should participate in the plan; savings rates should be 10% of salary or more; and 90% of participants should have their portfolio professionally managed.
Auto-enrollment brought Trover’s participation rate up to 86%, and employees were then surveyed about financial wellness. The company next decided to seek out a new provider with a demonstrated approach for getting employees financially ready for retirement. The search ended last July with The Standard, a provider with a managed account called Mainspring Managed, into which all participants were defaulted and where 91% remain today.
With the assistance of The Standard and Hilliard Lyons, Trover’s committee also altered a number of basic attributes of the plan: The vesting schedule changed to a five-year schedule, vesting 20% annually—it had been 0% the first year and 20% annually thereafter. “I viewed this as a significant participation de-motivator,” French says. “Average tenure in our call center is less than two years, and this represented 22% of our employee base.”
Trover implemented automatic escalation on January 1, 2014. Participants at 0% to 1% were automatically increased to 2%; other deferrals were raised by 1%.
With the change to The Standard, a more comprehensive analysis is performed to determine whether participants are on a solid glide path to successful retirement. If they are not, their deferrals are automatically increased 1% to 2%, based on the recordkeeper calculations. Also, starting last July 1, Trover began automatically enrolling employees at 6%, based on empirical research garnered from “Save More Tomorrow.”
Participation has since grown by 10 percentage points to 96%, and average savings rates increased from 4.3% in 2013 to 5.9% in 2014.
—Judy Faust Hartnett
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